Banking Stability Determinants in Africa

Ozili, Peterson K (2018): Banking Stability Determinants in Africa. Published in:

Abstract

This study investigates the determinants of banking stability in Africa. We present four measures of banking stability embedding banks’ loan loss coverage ratio, insolvency risk, asset quality ratio, and level of financial development, thereby allowing analysis of banking stability determinants from four complementary perspectives: protection for downside credit losses, distress arising from insolvency risk, non-performing loans, and financial development. The findings indicate that banking efficiency, foreign bank presence, banking concentration, size of banking sector, government effectiveness, political stability, regulatory quality, investor protection, corruption control and unemployment levels are significant determinants of banking stability in Africa and the significance of each determinant depends on (i) the banking stability proxy employed (ii) and depends on the period of analysis: pre-crisis, during-crisis or post-crisis. The results highlight the importance of institutional quality for banking stability in Africa. Banking supervisors in African countries should consider the role of financial structure and institutional quality for banking stability in the African region.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Structure; Banking stability; Institutional Quality, Financial Institutions, Bank Performance.
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

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